The City Flipped on Prop. B – But it Doesn’t Change Much Yet

For six years, the city of San Diego has stood with proponents of the 2012 Proposition B, the measure that eliminated pensions for most future city employees. It argued in lockstep with them in dozens of court hearings – matches that reached all the way to the California Supreme Court.

Even as the mayors changed and the City Council got more diverse and more liberal, the city defended the law as the will of the people. But the courts decided the mayor and city had violated state law in pushing that measure, and employee unions were about to begin the process of invalidating it completely.

Monday, the City Council decided to switch sides and join them.

Here’s what it all means.

It actually doesn’t change much.

Employee unions won a major legal battle. They proved that the city violated state labor law. The proposition that ended pensions was supported intensely by the city’s mayor. The unions proved that he was the city’s lead labor negotiator and had a responsibility to meet with unions before pushing a change to their benefits. He didn’t.

But the unions did not get a clear ruling that the proposition is therefore invalid. They must petition the state and the courts that the law on the city’s books should not be there. They are beginning that process now.

Supporters of the measure will keep arguing that invalidation is too harsh of a remedy.

And they will now argue about roughly three questions:

1. If a proposition like this violates the state’s labor law, is that enough to toss it out completely?
2. Is the voters’ constitutional right to put up initiatives like this superceded by state law? Voters in San Diego couldn’t, for example, pass an initiative to legalize slavery in San Diego because it would violate the Constitution. But can they really not pass an initiative that violates state law?

And, related:

3. Was Proposition B even a voter-led initiative? The unions’ lawyers say it was not. They say they have proven that it was a deliberate effort by the city itself to evade labor law. It should not benefit from the constitutional protections for citizens’ initiatives.

“It’s a steep argument, and one we finally welcome,” said Ken Lounsbery, the lead attorney for proponents defending Proposition B.

Lounsbery and his rival on the other side, Ann Smith, will continue to have this argument just as they would have. It’s just now the city is on Smith’s side.

Pensions aren’t coming back … yet.

Several thousand employees have been hired since 2012. All new city employees – except for police officers – have been collecting assets in 401(k)-style retirement accounts. They do not get guaranteed pensions. Whatever is in their accounts when they retire is what they’ll have to live on.

Monday, the city did not decide to bring back pensions for city employees.

It is still illegal for the city to enroll them in pension plans. That’s what this is about: taking that law, from Proposition B, out of the City Charter.

And even if that effort is successful, the city would still have to decide to give its employees pensions again. The California Supreme Court told a lower court to figure out how to make things right. That lower court, the state Court of Appeal, told the city and unions to listen to what the Public Employment Relations Board decided years ago, and that agency had told the city and unions to work it out.

The unions want “maybe getting pensions back” to be part of how they “work it out.”

There will be some resistance to that.

“The Council’s vote today to invalidate Prop B goes far beyond what any court — including the Supreme Court — has ordered the City to do. We have the ability to make whole the affected employees without overturning the will of a near super-majority of voters in 2012,” wrote Councilman Mark Kersey on Twitter Monday. Kersey, along with Councilmen Chris Cate and Scott Sherman, voted against joining the effort to invalidate Prop. B. Monday.

What’s more, there may be many of those employees who don’t want to go back to pensions. The stock market has done well since 2012, and clawing back their earnings somehow and putting those in a city-run pension system could cause some backlash.

The worrying is probably overwrought for now.

Monday’s decision was met with intense displeasure from the remaining City Hall Republicans.

“This puts the city’s long-term financial health at risk by supporting a return to a flawed system where unsustainable pensions led to devastating cuts to neighborhood services,” said Mayor Kevin Faulconer in a written statement.

Kersey had a more short-term view: “This action by the Council majority takes us back to the bad old days when terrible decisions by past city leaders led to a massively unsustainable system.”

Again, the actual action the Council took was not that immediately impactful.

It is true that the city enhanced pensions well beyond its capacity to make good on those promises. At the same time, it underfunded its pension plan. The pension payments the city has had to make over the last several years have been a very real burden on the city’s budget.

But simply reinstating pensions wouldn’t itself have a dramatic impact. The last pension plan for city employees was not very good. It had already been through a comprehensive pension reform process. The 401(k)-style programs the employees got instead were very similar if not more lucrative.

The goal with removing pensions entirely was to eliminate all future risk for taxpayers.

What’s more, in 2006 voters passed Proposition B (a different one!), which forced the city to get a vote of the people before enhancing pensions. But that law went into effect Jan. 1, 2007, and will expire 15 years from then.

That’s Jan. 1, 2022.

So the worst fears would be: The city would re-institute a pension program, employees would embrace it, and it would go back to wildly enhancing those pensions after 2022.

A lot can happen before then.